10 markets transformed by the Internet

November 01, 2007 09:21 IST

Online, every click is a commercial transaction. Somebody, somewhere, is making money every time a Web site gets visited. Everything is easier to sell online. Everyone is easier to sell online. Even fraud is easier now.

The Net has turned nearly every business into a global business and every customer into a global consumer. It's made stock brokerages so affordable that the average investor can buy and even trade frequently, even if all that trading brings them to ruin.

Everything's changed for professional investors, even the old-school fundamental types who cite influences like Graham and Dodd. Mariko Gordon, an institutional money manager at Daruma Asset Management, worries that because every investor out there can find the same numbers about every company online, she and her team have no edge. She's looking into developing a text-searching technique that will unearth bits of information that the numbers either ignore or obscure.

Sam Dedio runs small-, micro- and mid-cap funds for Julius Baer. The funds, which are only a year old, have scant assets. In the old days, Baer would have to find brokers to sell the funds, which would drive up the costs. But now, Baer can sell them directly online. If Dedio can rack up three years of solid performance, he'll get a high rating from Morningstar and the money will flow in through online mutual-fund superstores.

To get that performance, Dedio believes he has to buy companies with global exposure. Twenty years ago, that would mean buying a conglomerate like General Electric or ITT. But because of the Internet, even small companies are global now. Some of them have market caps that are small enough that Dedio, with minimal assets, can still take reasonable stakes.

Dedio owns shares in Orient-Express Hotels, which has a market cap of just $2.7 billion, which owns and manages real estate around the world, including the famed Orient Express railroad. It would be difficult to manage properties as diverse as the Hotel Cipriani in Venice and the 21 Club in New York without instant communication and a digitized global-supply chain. And customers are lured by Agatha Christy book vacations and safaris featured on Orient's site.

With RTI Metals, Dedio found a way into the global aerospace market by purchasing stock in the $1.8 billion company. The Internet drove down the costs of airline tickets and, though the industry has suffered several shocks over the years, many more people are flying now than they were 15 years ago. Right now, both Boeing and Airbus are struggling to meet the demand for new commercial airliners. RTI benefits because it makes the new titanium alloys that jet makers now prefer. Of course, RTI is expected to deliver its product on demand, another task made possible by the Internet.

Orient and RTI both have a few degrees of separation from the Internet. They're riding the aftershocks of the major changes that have occurred since the early 1990s. Other markets have been transformed in more dramatic ways.

H&R Block still has offices on street corners, but it's faster and easier to file simple returns online. Accountants still rule when returns are complicated, but there's no longer any reason to pay more than $50 for a simple 1040. If the IRS were to accept electronic filings without an intermediary, firms like H&R Block could find themselves in major trouble.

Even donating money to a presidential candidate has changed. Forget about the hard sell at the $50-a-plate county barbecue (where all the politicians mingle with regular folk for a few minutes) -- save your evening for something more interesting by sending a donation through Paypal. Sure, it lacks that sense of civic engagement, but your favorite politician didn't really want to shake your hand anyway.

Love fine art? The Internet allows you to bid at a Sotheby's auction from your living room. Those auctions are no longer reserved only for the well-heeled. As for the well-heeled, the money saved on airfare can be used to buy more pieces of European furniture, or paintings. Or if you are so inclined, you can snap up an unrestored copy of Amazing Spider-Man #1 for $6,600 on eBay.

Somewhere in Lagos, an e-mail is being composed. It's the old "Spanish Prisoner" scam -- which used to be done through the mail. It took a lot longer. People still fall for it though. That's one thing the Internet hasn't changed.